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Limoneira (NASDAQ: LMNR)
Q1 2023 Earnings Name
Mar 09, 2023, 4:30 p.m. ET
Contents:
- Ready Remarks
- Questions and Solutions
- Name Contributors
Ready Remarks:
Operator
Greetings, and welcome to Limoneira’s first quarter fiscal yr 2023 monetary outcomes convention name.[Operator instructions] As a reminder, this convention is being recorded. It’s now my pleasure to introduce your host, John Mills with ICR. Thanks. It’s possible you’ll start.
John Mills — Head of Investor Relations
Good afternoon, everybody, and thanks for becoming a member of us for Limoneira’s first quarter fiscal yr 2023 convention name. On the decision as we speak are Harold Edwards, president and chief govt officer; and Mark Palamountain, chief monetary officer. By now, everybody ought to have entry to the primary quarter fiscal yr 2023 earnings launch, which went out as we speak at roughly 4:00 PM Japanese Time. If in case you have not had an opportunity to view the discharge, it is obtainable on the Investor Relations portion of the corporate’s web site at limoneira.com.
This name is being webcast and a replay shall be obtainable on Limoneira’s web site as nicely. Earlier than we start, we want to remind everybody that ready remarks include forward-looking statements and administration might make extra forward-looking statements in response to your questions. Such statements contain plenty of recognized and unknown dangers and uncertainties, a lot of that are outdoors the corporate’s management and will trigger its future outcomes, efficiency, or achievements to vary considerably from the outcomes, efficiency, or achievements expressed or implied by such forward-looking statements. Necessary elements that would trigger or contribute to such variations embrace danger detailed within the firm’s 10-Qs and 10-Ks filed with the SEC and people talked about within the earnings launch.
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Besides as required by legislation, we undertake no obligation to replace any forward-looking or different statements herein, whether or not because of new data, future occasions, or in any other case. Please notice that in as we speak’s name, we shall be discussing non-GAAP monetary measures, together with outcomes on an adjusted foundation. We imagine these adjusted monetary measures can facilitate a extra full evaluation and larger understanding of Limoneira’s ongoing outcomes of operations, notably when evaluating underlying outcomes from interval to interval. We offer as a lot element as attainable on any objects which can be mentioned on an adjusted foundation.
Additionally, inside the firm’s earnings launch and in as we speak’s ready remarks, we embrace adjusted EBITDA, adjusted web loss per diluted earnings per share, and diluted web loss per frequent share, that are non-GAAP monetary measures. A reconciliation of adjusted EBITDA, adjusted web loss per diluted EPS, and diluted web loss per frequent share to essentially the most immediately comparable GAAP monetary measures are included within the firm’s press launch, which has been posted to its web site. And with that, it’s my pleasure to show the decision over to the corporate’s president and CEO, Mr. Harold Edwards.
Harold Edwards — President and Chief Government Officer
Thanks, John, and good afternoon, everybody. I’m happy with our efficiency within the first quarter. Regardless of the heavy rains in California pushing the preliminary first quarter avocado harvest and a portion of the lemon harvest into the second quarter, we generated over $37 million of income in our seasonally softer quarter. We had minimal harm to our crops from the rain and absolutely anticipate to recoup the delayed income within the second and third quarters, preserving our full yr 2023 quantity steering intact.
Moreover, we anticipate pricing for contemporary lemon cartons to extend within the second half of the fiscal yr. For brand spanking new buyers listening to our name as we speak, I want to rapidly recap our strategic transition plan that’s pivoting our enterprise towards an asset-lighter mannequin with a view to streamline our operations and promote non-strategic property, enhance the consistency of our earnings, improve EBITDA and dividends per share, cut back debt, right-size the stability sheet and enhance the return on invested capital. This plan contain the identification of roughly $150 million of property on the market, which due to larger worth realized in preliminary monetization efforts, we imagine are actually value roughly $180 million and a transition to a extra environment friendly working plan. We have made important progress advancing our technique to monetize sure non-strategic property with almost all of these recognized property bought, increasing our One World of Citrus initiative with the recruitment of near 1 million extra cartons from new grower companions and executing on Harvest at Limoneira, all of that are reworking our stability sheet and positioning us to enhance our prime and backside line outcomes.
Administration shall be assembly with our board of administrators this month for our annual strategic planning session to implement a brand new strategic capital allocation plan, considering our very sturdy stability sheet. We now have efficiently closed on the sale of 4 of the six recognized property over the previous six months for a complete of $130 million in proceeds. We ended the primary quarter with the introduced closing of our Northern Properties sale for roughly $99 million in web money proceeds. The Northern Properties sale is essentially the most transformative because the proceeds have been used to considerably cut back our web debt place by 72% from year-end 2022 to $28.9 million is predicted to be accretive on a professional forma EBITDA and earnings foundation will strengthen the stability sheet and allow us to pursue a variety of strategic alternatives to maximise shareholder worth.
After we have been on the lookout for a purchaser of our Northern Properties, it was crucial that we discover one which allowed us to maintain our lemon provide chain intact. The property consists of three,537 acres, made up of two,700 planted acres, 231 acres of plantable floor, and 606 acres of open area. As we specified by the introduced sale press launch, as a part of this transaction, Limoneira and Prudential Agricultural Investments entered right into a farm administration companies settlement to offer farming companies associated to the property for an preliminary time period of 1 yr and entered right into a grower packing and advertising and marketing settlement to offer packing, advertising and marketing and promoting companies for lemons harvested on the property for a minimal five-year interval. This piece of the transaction suits squarely with our strategic plan to develop our One World of Citrus in an asset-lighter manner, as we deal with leveraging our main world packing, advertising and marketing, and promoting companies utilizing extra grower companion fruit.
The economics of utilizing grower companions is extraordinarily engaging with Limoneira focusing on $2.00 to $2.50 per carton of margin, with no extra capital outlay. It additionally reduces the impression of pricing volatility and rising farming prices on our enterprise and shall be additive to EBITDA and earnings per share on a professional forma foundation. We now have develop into very engaging to develop our companions and proceed to develop best-in-class grower companies to bolster our enchantment by means of investments in our know-how and provide chain. Our strategic method to contemporary utilization allows our gross sales and advertising and marketing group to efficiently market contemporary lemons all year long with probably the greatest contemporary utilization charges out there.
In fiscal yr 2022, we bought over 78% of lemons contemporary at aggressive costs in comparison with our largest competitor who was at roughly 50%. That is clearly an essential draw with grower companions. We’re additionally working to raised help our grower companions by reconfiguring our world lemon packing community. This consists of lowering sure orange and lemon acreage globally, whereas nonetheless sustaining the packing and advertising and marketing of the lemons grown on these places.
Within the first quarter of fiscal yr 2023, roughly 66% of our U.S. pack contemporary lemon supply quantity got here from grower companions and our purpose is to have that quantity nearer to 75%. The construction of our Northern Properties cope with Prudential Agricultural Investments is a good instance of the route we’re headed, rising the service a part of our enterprise as we deal with packing, advertising and marketing, and promoting. And in return, you’ll start to see significant enchancment to our returns on invested capital with higher margins, money move, and earnings that develop into much more secure and predictable over the subsequent 12 to 18 months.
So far as our remaining property, we’ve $50 million of the now $180 million in property recognized that we plan to monetize over the subsequent 12 to 18 months. Even after the Northern Properties transaction, we proceed to personal roughly 11,800 acres with over 21,000 acre ft of owned water rights, utilization rights, and pumping rights. We’re discovering nice monetization alternatives for our water property by both fallowing acreage, leasing pumping rights, or promoting the water rights for important appreciation over our investments. A near-term water monetization alternative is the 1,300 acres of farmland we’ve in Yuma, Arizona that has related Class 3 Colorado River water rights.
The Division of the Inside has instructed that seven states that derive water from the Colorado River to cut back their consumption by a 3rd and the cuts will first come from Class 8 water rights all the way in which down. These states shall be pressured to go to these with senior rights, like Class 3 water rights, and pay for his or her water. There’s a proposed new fallowing program of which we plan to take benefit with 600 of our 1,300 acres, and we anticipate to obtain $2,433 an acre to divert water from farming to city use. A latest $80 million transaction within the Metropolis of Buckeye, Arizona supplies a comparable water gross sales worth of $13,500 per acre foot, which might equate to over $150 million for our Class 3 Colorado River water rights, of which Limoneira can be entitled 50%.
There is no assure we may obtain this worth, however it is a nice instance of what’s occurring in our area for comparable water property. Along with these property, we’ve our actual property growth undertaking Harvest at Limoneira. We introduced on the finish of December that we elevated our money proceeds projection for this undertaking by over 20% to $115 million and up to date our timeline to incorporate each the Harvest growth and the Harvest Medical Pavilion throughout the freeway. We obtained the primary $8 million of proceeds within the fourth quarter of fiscal yr 2022 and anticipate to generate the complete $115 million over seven fiscal years.
The undertaking is at present authorized to develop 1,500 residential models and we’re in negotiations with the Metropolis of Santa Paula to develop that as much as 2,000 models. We imagine we can announce the extra 500 models later this yr. Lastly, we stay up for transacting on $5 million of land gross sales on the Harvest Medical Pavilion within the fourth quarter of 2023. So what’s subsequent for Limoneira now that we’ve a really sturdy stability sheet and a transparent path to stronger EBITDA, money move, and earnings? Over the subsequent 12 to 18 months, you’ll be able to anticipate to see our continued transition to an asset-light enterprise mannequin and deal with the perfect use of our property to reinforce shareholder worth.
Our board and administration group will proceed to guage the best way to greatest leverage our experience in packing, advertising and marketing, and distributing citrus mixed with our priceless portfolio of agricultural lands, actual property properties, and water rights with a view to improve long-term shareholder worth. As for long term, along with capital allocation selections, our upcoming strategic Board of Administrators planning session will even evaluation completely different areas the place we will probably reinvest that may produce extra constant and extra dependable returns. Potential areas of funding may very well be in our provide chain by means of investments within the ahead distribution, ahead warehousing and elevated packing capability and increasing our avocado manufacturing and probably including worth to avocados past manufacturing as a complement to our One World of Citrus product choices. And with that, I am going to now flip the decision over to Mark.
Mark Palamountain — Chief Monetary Officer
Thanks, Harold, and good afternoon, everybody. As a reminder, it’s best to view our enterprise on an annual not quarterly foundation because of the seasonal nature of our enterprise. Traditionally, our first and fourth quarters are the seasonally softer quarters, whereas the second and third quarters are stronger. For the primary quarter of fiscal yr 2023, whole web income was $37.9 million, in comparison with whole web income of $39.3 million within the first quarter of the earlier fiscal yr.
Agribusiness income was $36.5 million, in comparison with $38.1 million within the first quarter final yr. Different operations income was $1.4 million, in comparison with $1.2 million within the first quarter of fiscal yr 2022. Agribusiness income for the primary quarter of fiscal yr 2023 consists of $24.7 million in contemporary lemon gross sales, just like $24.7 million throughout the identical interval of fiscal yr 2022. Roughly 1,308,000 cartons of contemporary lemons have been bought throughout the first quarter of fiscal yr 2023 at an $18.88 common worth per carton, in comparison with roughly 1,207,000 cartons bought at a $20.48 common worth per carton throughout the first quarter of fiscal yr 2022.
Of the 1,308,000 and 1,207,000 cartons of U.S. packed contemporary lemons bought throughout the first quarters of fiscal yr 2023 and 2022, respectively, 66% and 57%, respectively, have been procured from outdoors growers. As a part of the corporate’s strategic plan, it’s transitioning One World of Citrus to an asset-light mannequin by means of the enlargement of grower companions. As a result of heavy rainfall that occurred throughout the first quarter of fiscal yr 2023, the timing for the preliminary avocado harvest was pushed from the primary quarter into the second quarter of fiscal yr 2023.
The corporate acknowledged no avocado income within the first quarter of fiscal yr 2023, however expects to recoup this delayed income within the second and third quarters. The corporate acknowledged $800,000 of avocado income within the first quarter of fiscal yr 2022 on roughly 365,000 kilos at a $2.10 common worth per pound. The corporate acknowledged $1.2 million of orange income within the first quarter of fiscal yr 2023, in comparison with $900,000 within the first quarter of fiscal yr 2022. Roughly 64,000 cartons of oranges have been bought throughout the first quarter of fiscal yr 2023 at an $18.00 common worth per carton, in comparison with roughly 53,000 cartons bought at a $16.47 common worth per carton throughout the first quarter of fiscal yr 2022.
Specialty citrus and different crop revenues was $1.2 million within the first quarter of fiscal yr 2023 in comparison with $900,000 within the first quarter of fiscal yr 2022. Complete prices and bills for the primary quarter of fiscal yr 2023 have been $12 million in comparison with $48.8 million within the first quarter of final yr. The lower of $36.8 million was primarily the results of the achieve acknowledged from the sale of the Northern Properties in January 2023. Throughout the first quarter of fiscal yr 2023, the corporate made funding contributions of $2.6 million to completely fund and settle the corporate’s retirement plan and recorded settlement prices of $2.7 million.
There are not any remaining profit obligations or plan property. As well as, a patronage dividend of $1.4 million shall be recorded within the second quarter of fiscal yr ’23, in comparison with a patronage dividend of $1.6 million recorded within the first quarter of fiscal yr 2022. Working revenue for the primary quarter of fiscal yr 2023 was $25.9 million, in comparison with an working lack of $9.6 million within the first quarter of the earlier fiscal yr. Internet revenue relevant to frequent inventory after most well-liked dividends for the primary quarter of fiscal yr 2023 was $15.5 million, in comparison with a web loss relevant to frequent inventory of $6.6 million within the first quarter of fiscal yr 2022.
Internet revenue per diluted share for the primary quarter of fiscal yr 2023 was $0.84, in comparison with a web loss per diluted share of $0.38 for a similar interval of fiscal yr 2022. Adjusted web loss for diluted EPS for the primary quarter of fiscal yr 2023 was $9.3 million, in comparison with a lack of $5.7 million in the identical interval of fiscal yr 2022. Adjusted web loss per diluted share was $0.53, in comparison with an adjusted web loss per diluted share of $0.33 for the primary quarter of fiscal yr 2022. A reconciliation of web revenue or loss attributable to Limoneira Firm to adjusted web loss for diluted EPS is supplied on the finish of our earnings launch.
Adjusted EBITDA was a lack of $7.9 million within the first quarter of fiscal yr 2023, in comparison with a lack of $5.6 million in the identical interval of fiscal yr 2022. A reconciliation of web revenue to loss attributable to Limoneira Firm to adjusted EBITDA can also be supplied on the finish of our earnings launch. Turning now to our stability sheet and liquidity. On January thirty first, 2023, we bought our Northern Properties which resulted in whole web proceeds of $98.8 million.
The proceeds have been used to pay down all of our home debt, besides the AgWest Farm Credit score $40 million non-revolving line of credit score, which is mounted at 3.57% till July 1st, 2025. Lengthy-term debt as of January thirty first, 2023 was $40.9 million, in comparison with $104.1 million on the finish of fiscal yr 2022. Debt ranges as of January thirty first, 2023 minus $12.5 million of money available resulted in a web debt place of lower than $29 million at quarter finish. Additionally, we’ve $50 million of remaining non-strategic property for monetization and anticipate their sale mixed with bettering EBITDA will end result within the alternative to haven’t any debt and a money place on our stability sheet.
Now, I might like to show the decision again to Harold to debate our fiscal yr 2023 outlook and longer-term progress pipeline.
Harold Edwards — President and Chief Government Officer
Crop experiences for lemons proceed to recommend industrywide manufacturing is predicted to be down 10% to fifteen% in fiscal yr 2023 from Mom Nature. Nevertheless, because of the deliberate enlargement of our grower companion fruit, we expect to extend quantity and improve our market share in fiscal yr 2023. We proceed to anticipate whole lemons gross sales quantity to be within the vary of 5 million cartons to five.4 million cartons for fiscal yr 2023. That is up from 4.9 million cartons in fiscal yr 2022 and 4.4 million cartons in fiscal yr 2021.
For the second quarter of fiscal yr 2023, we anticipate to expertise continued pricing strain however imagine the industrywide decrease manufacturing will result in increased costs starting within the second half of fiscal yr 2023. Additionally, throughout the second quarter of fiscal yr 2023, we obtained a patronage dividend from our major lender AgWest, previously Farm Credit score West, of $1.4 million. We proceed to anticipate avocado volumes for fiscal yr 2023 to be within the vary of 4 million kilos to five million kilos. It is essential to notice that whereas fiscal yr 2022 was a file yr for avocado income, the California crop usually experiences alternate years of excessive and low manufacturing attributable to plant physiology.
This, together with antagonistic climate circumstances, is contributing to the year-over-year decline. We skilled unusually excessive temperatures in early September and a wind occasion in November that knocked fruit off of our bushes and may have a adverse impression on our 2023 avocado crop. As well as, we proceed to anticipate to obtain $115 million, in comparison with the earlier estimate of $95 million from Harvest at Limoneira and the addition of the Limoneira Lewis Neighborhood Builders II and East Space II unfold out over seven fiscal years, with proceeds of $8 million already obtained within the fourth quarter of fiscal yr 2022. Our money move projections have been up to date final quarter to incorporate the medical campus in our East Space II growth and a portion of the money move projections have been pushed out roughly 18 months because of the increased rate of interest atmosphere, which decreased the present variety of new house begins.
The breakdown is predicted to be as follows. Fiscal yr 2022 generated $8 million of money to Limoneira. Fiscal yr 2023 is predicted to generate $5 million. Fiscal yr 2024 is predicted to generate $8 million.
Fiscal yr 2025 is predicted to generate $17 million. Fiscal yr 2026 is predicted to generate $25 million. Fiscal yr 2027 is predicted to generate $30 million and financial yr 2028 is predicted to generate $22 million. And lastly, as beforehand acknowledged, we’ve recognized $180 million of non-strategic property on the market.
We now have made nice progress so far executing towards our plan with the sale of $130 million up to now six months, and anticipate to announce the sale of the remaining $50 million within the subsequent 12 to 18 months. And with that, I might now prefer to open the decision as much as your questions. Operator?
Questions & Solutions:
Operator
Actually. [Operator instructions] The primary query comes from Eric Larson from Seaport Analysis Companions. Please go forward.
Eric Larson — Seaport Analysis Companions — Analyst
Hello, guys. How are you doing as we speak?
Harold Edwards — President and Chief Government Officer
Hello, Eric.
Mark Palamountain — Chief Monetary Officer
Hello, Eric.
Eric Larson — Seaport Analysis Companions — Analyst
So my first query, and I believe I might know the reply to this. So in your huge asset gross sales, the water rights are going with these I am assuming. Is that true or is it not? And is there any method to form of break up or attempt to determine what the property water rights would have been as a part of the sale worth?
Harold Edwards — President and Chief Government Officer
So a part of the compelling worth that we obtained for the Northern Properties, Eric, was because of the entry of dependable water and water rights. So the water property did go along with the land property in these gross sales. There have been plenty of completely different water rights related to these properties with varied and ranging ranges of worth primarily based on the reliability and the sustainability of every of these sources. However previous to the divestiture of the Northern Properties, we had about 28,000 acre ft of water rights.
And that quantity now could be right down to 21,000 acre ft. So about 7,000 acre ft of water went with these properties.
Mark Palamountain — Chief Monetary Officer
And Eric, simply additional element. Up to now and above the perfect water rights that we’ve left, that are right here the adjudicated Santa Paula basin and Yuma, which equate to over 90% of the prior water worth. So nonetheless in nice form with water and transferring ahead there.
Eric Larson — Seaport Analysis Companions — Analyst
OK. Thanks. That is good clarification. So subsequent query is simply the lemon enterprise.
Clearly, it was delicate once more this quarter. You are beneath $19 per carton. I believe it is advisable to be round $20 to sort of even breakeven and make some cash. Give us a little bit extra taste, Harold, about actually when does the availability state of affairs actually begin to tighten up? What’s [Inaudible] sort of gradual bettering worth into the remainder of the yr, but it surely appears to be persevering with getting delayed and I am simply curious as to the way you take a look at the cadence of how that pricing outlook goes to be?
Harold Edwards — President and Chief Government Officer
In order that’s an excellent query. So we maintain coping with the truth of an oversupplied lemon market exacerbated by a whole lot of younger plantings all through California and Arizona domestically, but additionally a whole lot of fruit able to be imported from the southern hemisphere. And so Mark truly — Mark and his group accomplished a very fascinating and fascinating evaluation in regards to the economics of every of the rising districts in California and Arizona. And the profitability of every of the districts because it associated to a weighted common form of here’s what the prices of all of them collectively are after which this is what the worth achieved in every of these timeframes of the yr when every of these lemons go to market.
And what we discovered was actually fascinating. So the yr begins for us within the desert. And what we discovered there was that the fee construction was excessive actually pushed as a result of it is a powerful place to develop lemons, which compromises the yields. And the decrease yields equates to increased price per carton, since you’re not producing the quantity of fruit that you just do in different places, and the price of transportation to get all of it the way in which from Arizona to our packing home in Santa Paula.
So you set that collectively and that actually was a very adverse a part of the margin that we have been attaining. So what is going on on in Arizona now could be nearly — 50% of what is going on on Arizona is extra of a water story the place we adopted 600 of the 1,300 acres, which takes half of the price of farming out of that equation. And it is now being changed by a water coupon that we obtained for the fallowing program. So in a single day now the desert operation has develop into worthwhile.
Now we go up into the San Joaquin Valley, comparable state of affairs, truly increased productiveness, so increased yields. However due to the transportation prices and a few of the different prices related to the farming within the North that have been associated to vital agricultural purposes for pests associated to the Asian Citrus Psyllid, that additionally was a excessive price construction. So now that has all been divested and now that is been changed by farm administration companies revenue. And but, we nonetheless maintain that provide chain coming by means of our packinghouse.
Now you come right down to the California coast, which is the place 50% of our whole manufacturing takes place. And as you recognize, these lemons are what come out within the seasonally excessive time of the yr when consumptions within the highest within the late spring and the early summer time. And the profitability of the manufacturing down right here on the coast is definitely fairly good. And it is often because it is a a lot decrease price construction pushed by increased yields, but additionally increased pricing usually that we get at the moment of the yr.
So once you put all of it collectively, I believe what you are going to see is you are going to see even with these difficult costs that we’re receiving that is pushed by simply the pervasive oversupply of lemons, that you’re going to begin seeing our margins begin to enhance now due to the restructuring of the enterprise.
Eric Larson — Seaport Analysis Companions — Analyst
Acquired it. That makes a whole lot of sense. That is good perception. So once you sort of think about the entire thing, are you additionally seeing a rise in imports on lemons, or is that this actually a home situation that may be solved with form of the analytic that you just simply laid out?
Harold Edwards — President and Chief Government Officer
Effectively, I believe that the best problem can also be the best alternative is that once you get pricing down at this degree, it sort of creates a moat across the market as a result of it turns into uneconomic for the southern hemisphere shippers to ship into the market at this worth as a result of their prices of logistics to get it right here makes that prohibitive. So I believe it actually takes — I believe it takes an general worth above $20 a carton to make the import actuality, a aggressive menace and we’re simply not there but. We wish to be there, proper, as a result of our home fruit can take pleasure in these economics. However proper now, I believe that as we glance ahead, we do not see any catalysts till the second half of the yr to drive pricing up.
So we’ll simply must see the place we get after we get to the summer time — the late spring, early summer time. However as a result of it’s a smaller crop domestically, we’re optimistic that we’ll see increased pricing within the late spring, early summer time.
Eric Larson — Seaport Analysis Companions — Analyst
Acquired it. OK. Last query, you guys are simply getting — you assume now within the subsequent few days simply hammered with rain and stuff once more, you do not complain about moisture as a result of when you do not have it you understand how a lot you miss it. However are the climate circumstances right here nonetheless going to be such that it’s going to be prohibitive so that you can harvest, or how are you taking a look at — I believe there’s six to eight inches of rain in some elements of — in mountains proper to the East of you within the subsequent few days.
So how are you taking a look at all that?
Harold Edwards — President and Chief Government Officer
Sure. So we had a — it is one other nice query. We had an all-hands-on-deck assembly on that very topic this morning. And I suppose the excellent news is that we’ve good stock throughout all dimension and grade buildings.
We do anticipate being delayed in selecting for the higher a part of this week. As you are mentioning, there’s a whole lot of rain coming to Central and Northern California. We’re prepared proper now with the crews able to go right here on the coast if we have to go get fruit. However we anticipate being simply high quality when it comes to persevering with on with our harvest in District 1.
Proper now the crop is sort of halfway by means of the season, up within the San Joaquin Valley. And so we expect that’ll end out in a sort of a traditional manner, even with this climate and this rain, after which transition easily into District 2 onto the coast. I believe as you would possibly keep in mind, Eric, the District 2 crop is all the time there, as a result of the bushes are blooming right here year-round. So we do have entry to good quantities of fruit.
Inventories are good. And in contrast to 2019 the place we had that state of affairs the place the lemons bought huge as a result of we weren’t capable of get into harvest, we’re throughout that this yr and ensuring that that doesn’t occur, and attempting to be sure that our inventories are balanced by dimension and grade in order that we will maintain the availability chains cooking proper alongside even with this climate.
Eric Larson — Seaport Analysis Companions — Analyst
All proper. Thanks. I am going to get again in queue.
Operator
The following query comes from Raj Sharma from B. Riley. Please go forward.
Raj Sharma — B. Riley Monetary — Analyst
Hello. Thanks for taking my query. I had a — form of following up on the lemons, you simply talked about that you just anticipate a big pickup within the cartons with improved pricing. The place is that this elevated manufacturing going to come back from? Are you able to discuss that? I do know you mentioned there have been exterior growers as nicely.
And in addition, you probably did simply discuss why you thought the pricing was going to enhance and that was going to be a second half occasion. What sort of a pricing improve can we anticipate on lemons?
Harold Edwards — President and Chief Government Officer
Hello, Raj. That is an excellent query. I want I may reply that immediately with my crystal ball. However what we all know is that we’re behind in our harvest up within the valley, and sort of on par with our harvest for the rest of the season on the coast.
And as we take a look at our tree crops, we’ve ample manufacturing of our personal manufacturing. But in addition we have been profitable in recruiting a further 1 million cartons of latest fruit throughout all three of the districts which can be together with our personal manufacturing and the grower companions that we serviced in 2022. And so although Mom Nature introduced us a decrease tree crop of about 15% throughout every of the districts, our recruiting truly give us nice perception that we’ll be capable to develop and have entry to sufficient fruit. And so we’re nonetheless form of hanging on to our steering of 5.2 million to five.4 million cartons for the yr, which might show some fairly good progress yr on yr.
I believe we completed final yr with 4.9 million cartons. And so the fruit is there and we have got sufficient time to go get it and the climate is just not inflicting that a lot disruption at this level when it comes to altering dimension or grade construction. So we’re optimistic that we’ll be capable to get it and put it by means of the packinghouse and get it into the market.
Mark Palamountain — Chief Monetary Officer
Sure. And to observe up on pricing, as Eric requested earlier, all of it comes right down to that provide demand stability from the imports that usually begin from Argentina in late April, early Could. So if the transportation prices aren’t there, if the worth is not excessive sufficient for them to interrupt even, we’ll normally get a $2 or $3 elevate from present pricing, which is correct about slightly below $18 proper now. After which Mom Nature does the remainder of her factor.
However that is traditionally how we have checked out it from a budgeting perspective.
Raj Sharma — B. Riley Monetary — Analyst
That is nice. Thanks. After which on the avocado manufacturing, clearly decrease this yr than final yr. How a lot of a restoration do you see in Q2 onwards? What’s occurring on the manufacturing facet? Are you going to have the ability to get well a whole lot of it, most of it? Are you able to discuss that please?
Harold Edwards — President and Chief Government Officer
Sure. So the rain is definitely actually useful for the avocados. So I believe it provides us optimism that we must be within the excessive vary of form of the focused quantity numbers. The harvest actually now at this level shall be pushed by the alternatives that we see within the market.
Nice information was we noticed an uptick in avocado pricing final week. 48s are actually getting a little bit over $1.20 within the market. And that is sort of directionally the place we have been hoping to reap. So we discover the market appears to be bettering and coming to us at this level.
And we’re fairly assured that there is on the higher finish of the 4 million to five million pound vary that we guided to. So I believe our general avocado quantity and steering is unbroken. Fingers crossed that it is available in a little bit higher, but when it does, it’s going to be pushed by extra favorable market pricing. And it is simply too tough for us to pin that down.
However we watch the market each day. And when the market strikes, we are going to begin harvesting. I believe if I needed to guess how the fruit move would play out, I might say 50% of 5 million kilos in Q2 and 50% in Q3.
Raj Sharma — B. Riley Monetary — Analyst
Acquired it. After which simply if I can transfer on to profitability, are you able to sort of philosophically discuss the place you see EBITDA enhancements and do you see EBITDA enhancements, form of profitability enhancements when it comes to margins this yr? Is that coming from a larger form of brokering and delivery?
Harold Edwards — President and Chief Government Officer
Sure. So an excellent query and a bunch of niches to that.
Raj Sharma — B. Riley Monetary — Analyst
How a lot of an EBITDA can we anticipate?
Harold Edwards — President and Chief Government Officer
In order we have alluded to, this transition interval goes to be about 12 to 18 months, which we’ll see accretiveness from the transaction facet accretiveness, each from an EBITDA perspective and EPS. The areas that we are going to see profit from are, as you mentioned, the brand new recruiting, so 1 million new cartons, which comes into impact mainly beginning within the fall of this yr after which circles throughout by means of the seasons. And that is the focused $2.00 to $2.50 a carton working revenue. After which additionally the brokerage company enterprise, which this prior yr was simply over 1 million cartons attempting to ramp that to about 1.5 million this yr, after which about 3 million to three.5 million over the subsequent 5 years.
In order we have tried to spotlight, we’re topic to lemon pricing. Our prices have been comparatively beneath management. Our packing prices this quarter yr over yr was down versus prior yr per unit. So the entire measures that we put in place from the fee efficiencies have actually began to come back to play.
So we nonetheless see ourselves focusing on plus $30 million of EBITDA within the subsequent 5 years.
Raj Sharma — B. Riley Monetary — Analyst
Acquired it. And simply final query from me, the extra $50 million in gross sales that you just simply talked about that will occur within the subsequent yr or two years. Are you able to give us typically the areas? Is that water rights gross sales, land, any colour on that?
Harold Edwards — President and Chief Government Officer
Sure. So the extra 50 million, if I bought the query proper, is the 2 particular property, our southern hemisphere Chilean farming, which is 2 ranches, lemons primarily, after which our Windfall winery estates. And so these are placeholders at 50 million, fairly near guide worth. So we felt that that was an acceptable quantity.
However I believe relying on the correct alternative and the correct purchaser and the water circumstances, there shall be alternative for upside in there.
Raj Sharma — B. Riley Monetary — Analyst
Nice. Effectively, thanks for answering my questions and good luck. I am going to take this offline. Thanks.
Harold Edwards — President and Chief Government Officer
Thanks, Raj.
Mark Palamountain — Chief Monetary Officer
Thanks, Raj.
Operator
The following query comes from Ben Klieve from Lake Avenue Capital Markets. Please go forward.
Ben Klieve — Lake Avenue Capital Markets — Analyst
Thanks for taking my questions. Only a couple for me. To begin with, on the avocado facet, I wish to be sure I perceive sort of the technique and the timing right here. The climate brought on delays of harvesting within the first quarter.
And Harold, your feedback earlier prompt that you just’d sort of perhaps deliberately delayed harvest sort of in February, at the very least by means of February, due to sort of pricing circumstances. So to begin with, is that correct that you possibly can have harvested avocados thus far within the second quarter, however you’ve got sort of chosen to not strategically?
Harold Edwards — President and Chief Government Officer
Sure. That is precisely proper. We may have harvested. There’s fruit that’s harvestable proper now, however the markets have been — I do not know if you happen to’re following the markets, however they have been fairly delicate.
They usually’re simply beginning to enhance now. And once you layer on the advantages of the rain, which is sizing the fruit quicker, we truly discover ourselves in fairly good condition to begin our harvest starting subsequent week.
Ben Klieve — Lake Avenue Capital Markets — Analyst
OK. Nice. That is useful. Sure, I’ve been following that market and the grind, and I believe I’ve additionally been watching the identical climate experiences that Eric has.
And so I have been involved about that. However that is good to see that the way you guys are navigating that. After which my different query is, it seems such as you’ve bought a fairly spectacular achieve in market share this yr thus far, and I am questioning if you happen to can touch upon a excessive degree in regards to the correlation between lemon costs and your skill to take share? When costs listed here are down on this simply sort of dreary $17, $18 vary, can you get these relationships developed with farmers quicker than if you happen to’re in $20, $22 vary?
Harold Edwards — President and Chief Government Officer
So a part of gaining share is gaining provide first. So we’re actually having a whole lot of success with that, with our grower companies group, our very excessive contemporary utilization charges, after which our very aggressive returns going again to growers. So in consequence, we actually made enormous progress in our skill to entry new provide. After which with that provide, then it permits us to enter {the marketplace} at meals service and retail and be way more aggressive with dependable ranges of provide.
And so I believe the mixture of these two issues is what’s driving our progress and permitting us to choose up share. It’s possible you’ll recall after we first began sort of speaking in regards to the enterprise collectively, we all the time form of as a placeholder prompt that meals service represented 70% of our market alternative and retail was 30%. There was form of a structural change within the market pushed by COVID that actually hasn’t modified that a lot since we have all returned again to regular life. However I might say the precise demand is from a shopper perspective might be 50-50 now, 50% meals service and 50% retail.
And so our greatest pickups in features have been on the retail degree. And so that is the battlefield for us proper now. And we’re actually honing in on new huge retail accounts. And as you exit to your native market, you will have a significantly better likelihood of discovering Limoneira stickered lemons in these supermarkets now due to this new method and actually the place we’re focusing.
Ben Klieve — Lake Avenue Capital Markets — Analyst
Acquired it. Very useful. OK. Thanks for taking my questions.
I am going to get again in line.
Harold Edwards — President and Chief Government Officer
Thanks, Ben.
Mark Palamountain — Chief Monetary Officer
Thanks, Ben.
Operator
[Operator instructions] The following query comes from Vincent Anderson from Stifel. Please go forward.
Vincent Anderson — Stifel Monetary Corp. — Analyst
Thanks. Good afternoon.
Harold Edwards — President and Chief Government Officer
Hello, Vince.
Vincent Anderson — Stifel Monetary Corp. — Analyst
Once I take a look at simply what number of abroad rising areas have yet one more yr of poor manufacturing, I can undoubtedly perceive the place your worth expectations are coming from as we transfer by means of the stability of this yr. However what I am nonetheless attempting to wrap my head round is simply the latest strain we have seen. So I suppose a two-parter then. On the demand facet, how have Asian exports been trying, notably since apparently China informed everybody to begin consuming lemon water? After which on the availability facet, how a lot of this strain perhaps is being attributable to unseasonable Mexican imports into the U.S.
and what on earth is inflicting that? As a result of I am unable to keep in mind the final time I noticed this sort of quantity from them this early within the yr.
Harold Edwards — President and Chief Government Officer
Sure. So we proceed to hope that it is the first a part of your evaluation, which is that it is demand pickup, however that is what’s transferring extra slowly than provide pickup. There was simply an terrible lot of younger plantings throughout every of the districts. And that is actually what’s driving the oversupply domestically.
After which once you layer into that the large quantity of plantings out of Argentina and a few of the different southern hemisphere suppliers, that is what’s actually exacerbated all the state of affairs. What’s brought on the form of the malaise out there and the softer pricing now could be, keep in mind final yr, we have been actually pleased with our contemporary utilization charges and our skill to maneuver fruit contemporary for increased returns again to the growers. Our major competitor actually underperformed. And they also’ve sort of took the gloves off this yr and mentioned, all proper, we’re not going to let that occur once more.
And so there’s much more chasing worth right down to attempt to hold on to share. And if you happen to appeared throughout the entire — so we’re a member of what is referred to as CALGA, the California/Arizona Lemon Growers Affiliation, which is a consortium of the entire shippers. I believe it represents nearly 90% of the home provide of U.S. lemon manufacturing.
Limoneira’s pricing is correct on the prime of the listing proper now. And we attempt to stay as disciplined as we will as we go about doing that. Sometimes what occurs although is when coolers get full, and you may think about how this works, when coolers get full and fruit has a tough time transferring, competitors usually will use worth to maneuver fruit. And that is what’s exacerbating the pricing downside within the market.
Vincent Anderson — Stifel Monetary Corp. — Analyst
OK. That is very useful. After which as I simply sort of speculate on the potential deployment of your capital past deleveraging, it appeared like perhaps there have been some citrus property in Europe that is perhaps on the lookout for a brand new house. I am simply questioning if it makes any sense to make an funding in that market from a packing and brokering perspective, particularly if there is a manner in which you’ll have it develop into one other like valve on your South American fruit, or if that is probably not a excessive return market in your thoughts?
Harold Edwards — President and Chief Government Officer
Effectively, I believe that is a very astute statement. And it’s truly one thing we have been finding out and have been desirous about. The most important winner in that equation can be Argentina, as a result of a whole lot of that Argentina fruit can discover its manner into the European markets competitively. The U.S.
fruit, due to logistics, it is fairly powerful. Overseas change does not assist that as nicely. In order that’s actually much less of a chance for us at this level. I believe we see fairly — and our Board will assist us with this in our upcoming strategic planning session, however we see actually fascinating alternatives to put money into our provide chain by means of automation and enhanced capabilities by means of storage and capability enchancment to reap the benefits of the availability chains that we’ve, however to drive price out of the enterprise.
And the opposite factor to recollect is keep in mind after we bought Oxnard Lemon, we truly did a sale-leaseback on the preliminary a part of that sale to reap the benefits of that storage that we nonetheless rely on. So inside three years, we’ll be able the place we’ll want to seek out different storage. And we’re form of — we have got the calculators out and are working the numbers of what investing in elevated storage capabilities right here in Santa Paula would do. However the outcomes are fairly important.
And so we expect there’d be an excellent return on invested capital to put money into storage right here in Santa Paula, as a complement to our lately up to date packinghouse. So look form of towards one thing like that. And in addition — and we have talked about this earlier than, investments in elevated packing capability in Chile.
Vincent Anderson — Stifel Monetary Corp. — Analyst
OK. All proper, very useful. I recognize it.
Operator
[Operator instructions] This concludes the question-and-answer session. I want to flip the convention again over to Harold Edwards for any closing remarks. Please go forward.
Harold Edwards — President and Chief Government Officer
Thanks all on your questions and your curiosity in Limoneira. Have an excellent day.
Operator
[Operator signoff]
Period: 0 minutes
Name contributors:
John Mills — Head of Investor Relations
Harold Edwards — President and Chief Government Officer
Mark Palamountain — Chief Monetary Officer
Eric Larson — Seaport Analysis Companions — Analyst
Raj Sharma — B. Riley Monetary — Analyst
Ben Klieve — Lake Avenue Capital Markets — Analyst
Vincent Anderson — Stifel Monetary Corp. — Analyst
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